Expanded Impact of Trade Agreements

Although they have been in place for two years, we are just beginning to see the impact of the new trade agreements in Canada. When the single point of access (“SPA”) mechanism is implemented by the Federal government then all bidders will be able to see all opportunities in Canada, which is likely going to dramatically increase the number and quality of responses. Bidders from other jurisdictions will bring new attitudes and expectations to the current landscape and are likely to be far more concerned about their ease of access to rights and remedies. While federal and provincial/territorial entities have been dealing with this for some time, CETA is the first international agreement to push obligations down to the local government level. For this reason, the implementation of the SPA is likely to have the greatest impact at the municipal level, where risk management, legal counsel and CAOs will be forced to deal with the increased corporate risk that procurement represents. We may also begin to see the impact of other trade agreements such as the CPTPP – Comprehensive and Progressive Agreement for Trans-Pacific Partnership – the free trade agreement between Canada and 10 other countries in the Asia-Pacific region. Once fully implemented, the 11 countries will form a trading bloc representing 495 million consumers and 13.5% of global GDP, providing Canada with preferential access to key markets in Asia and Latin America.

Increasing Use of GPOs

We are likely to see increasing use of both public sector and private sector buying group arrangements. 2018 and 2019 saw dramatic incursion of US-based GPOs into the Canadian marketplace, and there is growing recognition of the value these partners can bring. As procurement departments across the board move to a more strategic function it only makes sense to leverage the resource and direct costs savings these groups offer for the more routine and standardized acquisitions. Many of these GPO not only design the strategy, advertise the opportunity, screen and select suppliers on behalf of their members, they also manage the contracts and collect data for improving their next contracting cycle. This in turn can free up valuable resources for member organizations to redirect towards some of the more strategic and emerging priorities for procurement and supply chain professionals.

Emphasis on Knowledge Transfer and Upskilling

The ongoing exodus of retiring baby boomers continues to contribute to a severe labour shortage for procurement departments and supply chain divisions globally and may contribute to the increased use of GPOs noted above. According to Harvard Business Review, 37% of all jobs in the US are in the B2B supply chain and procurement field, yet according to the Association for Supply Chain Management, demand for these managers exceeds supply by six to one leaving the performance of procurement departments and supply chains in crises. There simply are not enough candidates out there to fill the growing gap. This means that organizations need to work even harder to ensure there is knowledge transfer through such programs as internal mentoring, as well as a scalable training plan to upskill existing employees in time to take over from retirees. Education, experience and critical thinking skills are desperately needed if organizations hope to avert the pending crisis within their procurement departments.

Advent of Social Procurement

In line with the above, attracting and retaining young people to the profession will require consideration of ways to provide meaningful purpose and a sense of contribution to the work. While optimizing the cost of goods and services is important, the opportunities that social procurement brings to the table complement and leverage traditional procurement strategies. Social procurement capitalizes on a growing global trend to do more ‘social good’ within the fiscal resources that organizations are responsible for. A key strategy is engaging with social enterprises as a low risk, high value way to employ and empower those with barriers to employment while strengthening the fabric and economy of the local community. If your organization is on the front end of this growing trend, your procurement staff can take pride in moving from making good deals, to making deals that do good.

Intersection of Technology and Innovation

E-Procurement solutions and various procure-to-pay options continue to flood the market. Canadian organizations will wrestle with the best fit, as they navigate increased automation in all facets of the supply chain. Digitization and the changing dynamics of international trade add a tricky overlay to this landscape. According to Elon Musk we are already cyborgs, given our intense devotion to devices and all-encompassing access to information. The incursion of artificial intelligence is upon us and 2020 will be a year for accelerated use of robots, 5G, blockchain and other technologies that will radically transform the profession. The increased adoption of IT will be challenged by needs for protection of privacy and scalable connectivity.

Focus on Sustainability

As social procurement and increasing emphasis on corporate social responsibility advances, the use of sustainable energy such as solar, wind and tidal power are top of mind for progressive organizations. From construction, to IT, to fleet management, improving social development and minimizing the environmental footprint at every stage of the product life. From raw material extraction to end of life disposal is being embedded in most purchasing and procurement policies. More than just policy statements, stakeholders are demanding tangible, measurable results and organizations will be pushed to demonstrate their commitment to the concept of sustainability. The concept of a circular economy based on conservation is impacting an economy rooted in consumption¹. This implies further resilience in supply chain strategies to meet expectations on value.

If you want to stay up to date on emerging trends and best practices in procurement, our upcoming PSPP 202 Soliciation and Award course starts February 24th. PSPP 202 will help you reduce your organization’s risk levels by showing you how to navigate the complexities of fairness and transparency.

¹https://www.sshrc-crsh.gc.ca/society-societe/community-communite/ifca-iac/evidence_briefs-donnees_probantes/canada-uk/de_lange-walsh-eng.aspx

Readers are cautioned not to rely upon this article as legal advice nor as an exhaustive discussion of the topic or case.  For any particular legal problem, seek advice directly from your lawyer or in-house counsel.  All dates, contact information and website addresses were current at the time of original publication.